Chapter 1—Globalizing Business
TRUE/FALSE
1. A multinational enterprise is a firm that engages in foreign direct investment by directly managing
value-added activities in other countries.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 4 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
2. The term “emerging markets” refers to all markets other than the developed markets.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
3. Gross domestic product (GDP) is the sum of value added by resident firms, households, and
governments operating in an economy.
ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
4. Majority of the global GDP is contributed by the emerging markets.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
5. Purchasing power parity (PPP) is a conversion that determines the equivalent amount of goods and
services different currencies can purchase.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
6. Purchasing power parity (PPP) is calculated as the sum of value added by resident firms, households,
and governments operating in an economy.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
7. Emerging markets contribute about 26% of global GDP without adjusting for purchasing power parity
(PPP).
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 7 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
8. More than half the GDP produced by emerging markets comes from outside the BRIC countries.
, ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 7 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
9. On the global economic pyramid, the Triad refers to developed economies consisting of North
America, Western Europe, and Japan.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
10. All the countries of the BRIC belong to the top tier of the global economic pyramid.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
11. The second tier of the global economic pyramid is made up of countries with a per capita annual
income of more than $20,000.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
12. The emerging markets of the world are placed at the top of the global economic pyramid.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
13. The global economic pyramid does not represent countries that have a per capita annual income of less
than $2,000.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
14. The term "base of the pyramid" represents economies where individuals make less than $2,000 a year.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
15. Reverse innovations are innovations that are adopted first in the Triad-based multinationals and then
diffused around the world.
ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
16. Reverse innovation is an example of bottom up innovation.
ANS: T PTS: 1 DIF: Difficulty: Moderate
, REF: p. 10 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
17. The Group of 20 includes the European Union (EU)—a regional bloc.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 11 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
18. Globalization has driven up the salaries of low-level jobs.
ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 12 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Comprehension
19. An international premium is a significant pay raise awarded to expatriate employees working abroad.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 12 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
20. Approximately 80 million people worldwide are employed by foreign-owned firms.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 13 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
21. Overall, the focus on firm performance around the globe defines the field of global business more than
anything else.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 15 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
22. An institution-based view suggests that the success and failure of firms are enabled and constrained by
business norms of the host nation.
ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 15 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Comprehension
23. Formal institutions include laws, regulations, and rules.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 15 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
24. The institution-based view places emphasis on the external factors that could affect a firm.
ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 16 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
, 25. Focusing on a firm’s internal resources and capabilities is the main emphasis of the resource-based
view.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 16 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
26. Liability of foreignness is the inherent disadvantage experienced by foreign firms in host counties
because of their non-native status.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 16 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
27. Most opponents of globalization view globalization as a long-run historical evolution since trade
began.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: pp. 18-19 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
28. According to the pendulum view of globalization, globalization is a relatively new phenomenon
triggered by the information revolution of early 1990s.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 19 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
29. Scenario planning is a technique to prepare and plan exclusively for high risk scenarios.
ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 20 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
30. Standardization of markets would lead to a state of semiglobalization.
ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 21 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Comprehension
31. Semiglobalization is primarily caused by the practice of total isolation.
ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 21 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Comprehension
32. The current state of globalization around the world is that of semiglobalization.
ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 21 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
33. Semiglobalization calls for adopting one way of doing business for all conditions.
TRUE/FALSE
1. A multinational enterprise is a firm that engages in foreign direct investment by directly managing
value-added activities in other countries.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 4 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
2. The term “emerging markets” refers to all markets other than the developed markets.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
3. Gross domestic product (GDP) is the sum of value added by resident firms, households, and
governments operating in an economy.
ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
4. Majority of the global GDP is contributed by the emerging markets.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
5. Purchasing power parity (PPP) is a conversion that determines the equivalent amount of goods and
services different currencies can purchase.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
6. Purchasing power parity (PPP) is calculated as the sum of value added by resident firms, households,
and governments operating in an economy.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
7. Emerging markets contribute about 26% of global GDP without adjusting for purchasing power parity
(PPP).
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 7 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
8. More than half the GDP produced by emerging markets comes from outside the BRIC countries.
, ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 7 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
9. On the global economic pyramid, the Triad refers to developed economies consisting of North
America, Western Europe, and Japan.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
10. All the countries of the BRIC belong to the top tier of the global economic pyramid.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
11. The second tier of the global economic pyramid is made up of countries with a per capita annual
income of more than $20,000.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
12. The emerging markets of the world are placed at the top of the global economic pyramid.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
13. The global economic pyramid does not represent countries that have a per capita annual income of less
than $2,000.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
14. The term "base of the pyramid" represents economies where individuals make less than $2,000 a year.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
15. Reverse innovations are innovations that are adopted first in the Triad-based multinationals and then
diffused around the world.
ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
16. Reverse innovation is an example of bottom up innovation.
ANS: T PTS: 1 DIF: Difficulty: Moderate
, REF: p. 10 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
17. The Group of 20 includes the European Union (EU)—a regional bloc.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 11 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
18. Globalization has driven up the salaries of low-level jobs.
ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 12 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Comprehension
19. An international premium is a significant pay raise awarded to expatriate employees working abroad.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 12 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
20. Approximately 80 million people worldwide are employed by foreign-owned firms.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 13 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
21. Overall, the focus on firm performance around the globe defines the field of global business more than
anything else.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 15 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
22. An institution-based view suggests that the success and failure of firms are enabled and constrained by
business norms of the host nation.
ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 15 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Comprehension
23. Formal institutions include laws, regulations, and rules.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 15 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
24. The institution-based view places emphasis on the external factors that could affect a firm.
ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 16 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
, 25. Focusing on a firm’s internal resources and capabilities is the main emphasis of the resource-based
view.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 16 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
26. Liability of foreignness is the inherent disadvantage experienced by foreign firms in host counties
because of their non-native status.
ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 16 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
27. Most opponents of globalization view globalization as a long-run historical evolution since trade
began.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: pp. 18-19 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
28. According to the pendulum view of globalization, globalization is a relatively new phenomenon
triggered by the information revolution of early 1990s.
ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 19 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
29. Scenario planning is a technique to prepare and plan exclusively for high risk scenarios.
ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 20 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
30. Standardization of markets would lead to a state of semiglobalization.
ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 21 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Comprehension
31. Semiglobalization is primarily caused by the practice of total isolation.
ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 21 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Comprehension
32. The current state of globalization around the world is that of semiglobalization.
ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 21 OBJ: LO: 1-4 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge
33. Semiglobalization calls for adopting one way of doing business for all conditions.
